Business Processes Chapter 4. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 2 Chapter Objectives Be able to: Explain what

Business Processes

Chapter 4

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 4 - 2

4 Chapter Objectives

Be able to:• Explain what a business process is and how the business perspective differs from a

traditional, functional perspective. • Create process maps for a business process and use them to understand and

diagnose a process. • Calculate and interpret some common measures of process performance. • Discuss the importance of benchmarking and distinguish between competitive

benchmarking and process benchmarking. • Describe the Six Sigma methodology, including the steps of the DMAIC process. • Use and interpret some common continuous improvement tools. • Explain what the Supply-Chain Operations Reference (SCOR) model is and why it is

important to businesses.


4 Business Processes

Process – A set of logically related tasks or activities performed to achieve a defined business outcome. Primary process – A process that addresses the main

value-added activities of an organization. Development process – A process that seeks to improve

the performance of primary and support processes. Support process – A process that performs necessary,

albeit not value added activities.

© 2010 APICS Dictionary


4 Improving Business Processes

Figure 4.3


4 Mapping Business Processes

Mapping – The process of developing graphic representations of the organizational relationships and/or activities that make up a business process.

Process Map – A detailed map that identifies the specific activities that make up the informational, physical, and/or monetary flow of a process.


4 Purposes of Mapping

Create a common understanding of the processes, activities, and results.

Define the boundary of the process.

Provide a baseline to measure the impact of improvement efforts.


4 Process Mapping Guidelines Identify the entity that will serve as your focal

point. Customer? Order? Item?

Identify clear boundaries and starting and ending points.

Keep it simple Does this detail add any insight? Do we need to map every exception condition?


4 Process Mapping Symbols

Figure 4.4


4 Process Mapping Example

San Diego Distribution Center (DC) Process:

Dealer faxes order to DC. One out of 25 orders lost because of paper jams. Fax sits in “In Box” around 2 hours (up to 4) until internal mail picks it up. Internal mail takes about one hour (up to 1.5 hours) to deliver to the picking

area. One out of 100 faxes are delivered to the wrong place. Order sits in clerk’s in-box until it is processed (0 to 2 hours). Processing time

takes 5 minutes. If item is in stock, worker picks and packs order (average = 20 minutes, but up

to 45 minutes). Inspector takes 2 minutes to check order. Still, one out of 200 orders are

completed incorrectly. Transport firm delivers order (1 to 3 hours).


4 Let’s Map the Process!

What is the focal point of the mapping effort?

What are the boundaries of the process map?

What detail is missing from this simple example?


4 One Possible Solution

Figure 4.6


4 Guidelines for Process Improvement

Examine each delay symbol Cause, Length, Possible to Reduce?

Examine each activity symbol Necessary? What is the value? How can we

prevent errors? Examine each decision symbol

Can it be eliminated? Look for loops

Would better quality eliminate them? Costs?


4 Swim Lane Process Maps

Swim lane process map – A process map that graphically arranges the process steps so that the user can see who is responsible for each step.


4 Swim Lane Process Example

Figure 4.7


4 Measuring Process Performance

Quality

Cost

Time

Flexibility


4 Productivity

Productivity – A measure of process performance.

Productivity = Outputs Inputs


4 Productivity

Single-factor productivity – A productivity score that measures output levels relative to single input.

Multifactor productivity – A productivity score that measures output levels relative to more than one input.


4 Examples

Batteries ProducedMachine Hours + Direct Labor Hours

Total Nightly Sales ($)Total Nightly Costs ($)

Batteries ProducedDirect Labor Hours

Single-factorproductivity ratio:

Multifactor:

Total multifactor:


4 Another ExampleQuantity $/Unit

Car X 4,000 cars $8,000/car

Car Y 6,000 cars $9,500/car

Total labor for building X

20,000 hours $12/hour

Total labor for building Y

30,000 hours $14/hour


4 Productivity Example

Car X: (4,000 cars / 20,000 hrs) = ?

Car Y: (6,000 cars / 30,000 hrs) = ?

How might these measures be affected by capital substitution?

What is the Labor Productivityin hours for Each Car?



What is the Labor Productivityin hours for Each Car?

Car X: (4,000 × $8,000)= ?(20,000 × $12)

Car Y: (6,000 × $9,500) = ?(30,000 × $14)



Car X: (4,000 cars / 20,000 hrs) = .2

Car Y: (6,000 cars / 30,000 hrs) = .2

Car X: (4,000 × $8,000)/(20,000 × $12) = 133.33

Car Y: (6,000 × $9,500)/(30,000 × $14) = 135.72

What are the benefits/drawbacks?


4 Efficiency

Efficiency – A measure of process performance; the ratio of actual outputs to standard outputs.

Standard output – An estimate of what should be produced, given a certain level of resources.


4 Efficiency

Efficiency = 100% (actual outputs / standard outputs)

OR: Efficiency = 100% (standard time/actual time) for one unit


4 Cycle Time

Cycle Time – The total elapsed time needed to complete a business process.

Percent Value-Added Time – The percentage of total cycle time that is spent on activities that actually provide value.

Percent Value-Added Time = 100% (value-added time)/(total cycle time)


4 Benchmarking

Benchmarking – The process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance.

Competitive Benchmarking – The comparison of an organization’s processes with those of competing organizations.


4 Competitive Benchmarking

Table 4.7


4 The Six Sigma Methodology

Six Sigma – A business improvement methodology that focuses an organization on: Understanding and managing customer requirements Aligning key business processes to achieve those requirements Utilizing rigorous data analysis to understand and ultimately minimize

variation in those processes Driving rapid and sustainable improvement to the business processes.


4 Six Sigma People

Champion

Master Black Belt

Black Belt

Green Belt

Team Members


4 Six Sigma Methodology

DMAIC Define the goals of the improvement activity Measure the existing process Analyze the process Improve the process Control the new process

DMADV Define, Measure, Analyze, Design, Verify (Ch 15)


4 Continuous Improvement Tools

Root cause analysis Cause-and-effect diagrams Five Whys

Scatter plot Check sheet Pareto Chart Run Chart Bar Chart Histogram


4 Root Cause Analysis

Root cause analysis – A process by which organizations brainstorm about possible causes of problems and then narrow the focus to a root case.


4 Cause-and-Effect Diagram

Figure 4.8Commonly known as a fishbone or

Ishikawa diagram

Branches are organized around the Five Ms


4 Five Whys

Five Whys - An approach used in root cause analysis to brainstorm successive answers to the question “why is this a cause of the original problem?”


4 Scatter Plot

Figure 4.10


4 Check sheet - Example

Table 4.9


4 Pareto Chart

Figure 4.17


4 Bar Graph

Figure 4.12


4 Run Chart

Figure 4.12


4 Histogram

Figure 4.12


4 Understanding Variability

How Standardized Should Processes Be? Some consider tools such as process mapping and DMAIC

to be “overused” and applied in environments where variation is valued.

Four Types of Processes Mass processes – same output every time Mass customization – controlled variation Artistic processes – variability in process and outputs are

valued Nascent (broken) process – mismatch between customer

wants and process deliverable


4 Business Process Reengineering (BPR)

Business Process Reengineering – A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in cost, quality, service, and speed. © 2010 APICS Dictionary


4 The SCOR Model Five core processes for Level 1

Source

Make

Deliver

Return

Plan


4 The SCOR Model

Level 2 Processes – Break down Level 1 processes into more detail. Make to stock Make to order Engineer to order

Level 3 Processes – Describe in detail the actual steps required to execute level 2 processes.


4 The SCOR Model

© Supply Chain Council, 2011

Figure 4.18

4 - 46Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

Business Processes Case Study

Swim Lane Process Map for a Medical Procedure


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Business Processes Chapter 4. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall4 - 2 Chapter Objectives Be able to: Explain what